The future of one of the largest hedge funds in the world is currently up in the air. Tiger Global Management has lost $42 billion this year, which is the same as losing $185 million per trading day.
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The fund has suffered losses as a result of poor investments in public technology stocks and startup companies. According to a recent article published in the industry publication PYMNTS:
According to recent reports
the value of the private funds managed by technology investor Tiger Global Management has been reduced by nearly 25 percent this year, leading to one of the industry’s largest-ever declines in assets, which currently sit at $42 billion.
According to sources speaking with Bloomberg, the value of some of the companies held by Tiger Global’s venture unit, which had previously been private but have since gone public, has decreased.
The division was responsible for overseeing approximately $43 billion as of the end of September, down from $65 billion at the end of the previous year.
According to the sources, the company’s public investment operation’s assets have decreased from $35 billion to $15 billion. Tiger Global representatives were not immediately available for comment.
It’s possible that the actual losses will be even higher. The NASDAQ is down thirty percent so far this year, which is a significant improvement over the thirty percent markdown that Tiger has taken on its startup portfolio.
In addition to everything else that went wrong, Tiger lost out in the collapse of FTX. The investment of $38 million made by the fund is currently worthless.
The outlook is particularly gloomy with regard to Tiger’s public stock portfolio. This year, the portfolio has experienced a loss of 57%.
This indicates that Tiger’s public stocks would need to more than double before the company could be considered profitable again. Given the state of the global economy, this seems highly improbable.
In my opinion, the end of Tiger is very close at hand.
The company will not be able to start charging performance fees until it has recovered from its previous losses. That might not happen for a good many years, if at all.
The enticing 20% performance fee that hedge funds receive is the industry’s primary source of revenue. Without it, there will be no large bonuses at the end of the year.
The Brutal Reality
Let’s be honest: most people don’t invest in hedge funds with the intention of changing the world. They sign up for the opportunity to make money—potentially a lot of money.
Because of how uncertain Tiger’s future is, employees are likely to look for work somewhere else.
If, on the other hand, the managers decide to establish a new fund, they will have a blank slate to work with. They are free to resume charging performance fees as of the very first day.
It’s to their benefit. The news isn’t so good for their investors.
In your opinion, what opportunities do you see for Tiger in the future? Please let me know by leaving a comment at the bottom of this post.